Weekly Market Update 5/03/2024

April was a tough month for both stocks and bonds, but perhaps April showers do indeed bring May flowers, as markets finished the week with the best day of trading for both the S&P 500 and the Bloomberg US Aggregate Bond index since February.  Underpinning Friday’s market strength was a perfect goldilocks jobs report that saw wage growth, the unemployment rate, and job growth all come in worse than expected, but strong enough to assure markets that the economy is still on steady footing.  Investors cheered the report, as it cooled growing concerns around inflation and came just days after Federal Reserve Chair Jerome Powell remarked that an unexpected weakening in the labor market could spur interest rate cuts.  S&P 500 earnings results also helped as the first quarter earnings season is 80% complete and on pace to see profits rise almost 5% from a year prior.  Next week will be much less eventful as it relates to economic data and earnings releases, so it will be interesting to see if this week’s momentum continues.

RESILIENT LABOR MARKET

The unemployment rate rose from 3.8% to 3.9% in April but remained below 4% for the 27th consecutive month, the longest streak since 1967-1970 (see chart below).  Ultimately the Fed wants to see the labor market come into better balance between supply and demand and with this week’s job openings survey falling to its lowest levels since the pandemic and wage growth moderating to levels not seen since May 2021, it certainly seems like that might be the case.

Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder

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